For months, Italian banks have been at the center of national and international attention and their problems are no longer a secret to anyone, despite the fact that the Ministry of Economy continues to reassure about the sustainability of the system. Lately, however, the attention of the markets seems to have focused above all on one of the three Italian banking giants: Unicredit (the other two are Intesa Sanpaolo and Banco Bmp).
The reason is obvious, the institute led by Jean Pierre Mustier will launch from February 6th the most impressive capital increase in the history of Italian finance. The value? 13 billion euros.
Those who are not familiar with the language of stock exchanges and markets may have some difficulty fully understanding what it is about and above all why the operation of the bank in Piazza Gae Aulenti is as important as it is ambitious.
Understanding what it is about is not only important for the shareholders and savers who are directly involved in the recapitalization and who have to choose whether or not to participate in the project, but also for those who do not want to be left behind in a world where expanding their financial education has become an essential requirement.
What is a capital increase
The capital increase is an extraordinary operation that a company carries out to raise liquidity on the market. By carrying out a recapitalization, the share capital (the value of the sums and assets contributed by the shareholders) is modified, which also determines a change in the deed of incorporation of the company itself.
How does a capital increase work?
Capital increases can be carried out in various ways: for a fee, free of charge and in a mixed form.
- The paid capital increase consists in the subscription of new shares through the payment of a consideration fixed by the company on the basis of the placement price of the new shares. Once the latter have been placed, the price of the old securities will align with the new one. This is the case chosen by Unicredit.
- The free recapitalization consists in the assignment, free of charge, of new shares to the shareholders. Alternatively, the company may decide to increase the nominal value of existing securities.
- The last available option consists in the possibility of carrying out a capital increase in a mixed form (paid securities + free securities.)
Capital increase: the issue of new shares
The capital increase is approved during an extraordinary board of directors meeting of the company. Once this is done, the company issues new shares on the market which are offered to shareholders in proportion to the shares already owned through the so-called option right. The latter is none other than the right of those who are already shareholders to have a preferential lane in the subscription of the capital increase. The aim is to keep the proportion with which each shareholder participates in the capital unchanged and, in parallel, to compensate for any capital losses deriving from the recapitalisation. The following right is also attributed to the holders of convertible bonds through the exchange ratio and to the holders of warrants.
At this point the choice passes into the hands of the shareholder who can decide to exercise his option right, by participating in the capital increase, or he can opt for the sale of this right on the market.
